Correlation Between First Advantage and ICF International

Can any of the company-specific risk be diversified away by investing in both First Advantage and ICF International at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining First Advantage and ICF International into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between First Advantage Corp and ICF International, you can compare the effects of market volatilities on First Advantage and ICF International and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in First Advantage with a short position of ICF International. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Advantage and ICF International.

Diversification Opportunities for First Advantage and ICF International

0.45

Correlation Coefficient

First Advantage  ICF International

Very weak diversification

The 3 months correlation between First and ICF is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding First Advantage Corp and ICF International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ICF International and First Advantage is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on First Advantage Corp are associated (or correlated) with ICF International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ICF International has no effect on the direction of First Advantage i.e., First Advantage and ICF International go up and down completely randomly.

Pair Corralation between First Advantage and ICF International

Allowing for the 90-day total investment horizon First Advantage is expected to generate 1.01 times less return on investment than ICF International. But when comparing it to its historical volatility, First Advantage Corp is 1.0 times less risky than ICF International. It trades about 0.08 of its potential returns per unit of risk. ICF International is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  12,940  in ICF International on August 13, 2024 and sell it today you would earn a total of  4,117  from holding ICF International or generate 31.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.6%
Values	Daily Returns

First Advantage Corp  vs.  ICF International

First Advantage Corp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in First Advantage Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal basic indicators, First Advantage may actually be approaching a critical reversion point that can send shares even higher in December 2024.

ICF International

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ICF International are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak technical and fundamental indicators, ICF International may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with First Advantage and ICF International

The main advantage of trading using opposite First Advantage and ICF International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Advantage position performs unexpectedly, ICF International can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in ICF International will offset losses from the drop in ICF International's long position.

The idea behind First Advantage Corp and ICF International pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Global Correlations module to find global opportunities by holding instruments from different markets.